China: Inflation lost momentum in December – UOB

Pablo Piovano FXStreet

Economist at UOB Group Ho Woei Chen, CFA, assesses the latest inflation figures in the Chinese economy.

Key Takeaways

“China’s CPI and PPI cooled off at a faster than expected pace in Dec. Notably, CPI and PPI both fell on a month-on-month basis.”

“We expect headline CPI inflation to remain stable under 2% in the next few months before heading higher in 2H22 for full-year 2022 average of around 2.2%. Meanwhile, the higher comparison base should set PPI into a slower growth pace ahead. After averaging 8.1% in 2021 (2020: -1.8%), we expect PPI to moderate towards 4-6% in 2022.”

“As CPI inflation returns below 2% and PPI continues to moderate, this will provide a more conducive backdrop for the People’s Bank of China’s (PBOC) to ease its monetary policy in 1H22. We expect the 1Y medium-term lending facility (MLF) rate to be cut this month following the 5 bps reduction in the benchmark 1Y Loan Prime Rate (LPR) in Dec 2021.”

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

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